The Stanford startup worth millions, could be India’s tech unicorn

“When we started 12 months ago, every conversation we had was, ‘You’re completely out of your mind, it’s never going to work,'” said teenage CEO Aadit Palicha.

However, Palicha’s company managed to prove those doubters wrong: it is now approaching unicorn status and is one of India’s fastest growing fast trading apps. A unicorn is a startup worth over $ 1 billion.

Zepto is a startup that promises to deliver groceries in less than 10 minutes. Despite being just one of many companies to join the instant trade wave, it has already attracted the attention of investors.

Its last cash injection of $ 200 million in May 2022 valued the business at $ 900 million, just nine months after its launch.

We thought it was just a more exciting opportunity than studying at an elite university.

Aadit Palica

Co-founder and CEO, Zepto

Leading its meteoric growth are Palicha and Kaivalya Vohra, two 19-year-olds who left Stanford University to pursue their entrepreneurial dreams.

“By that time, we had already climbed to a couple of million dollars in annualized revenue. We said there is an opportunity to raise a large amount of capital, it is clearly suited to the product market,” Palicha told CNBC. Make It.

“How many people in their life have the opportunity to build a potential generational company? We thought it was just a more exciting opportunity than studying at an elite university.”

45 to 10 minutes

The idea for Zepto was born in July 2021, when childhood friends got stuck in their homes in Mumbai, right in the middle of the Covid-19 pandemic and a national blockade.

At that time, the demand for delivery services increased as many stayed at home.

“Online shopping [would] take six, seven days to deliver, offline options have been virtually closed or unavailable. It was incredibly difficult for us to shop, ”said Palicha, who is the CEO of Zepto.

“We have had similar conversations with our neighbors who have complained about the same problem. That’s when we said … why don’t we try to build a solution for the people of our neighborhood?”

If you look at all the other major ecommerce categories … you take them all and combine them, they are a fraction of the food market.

Aadit Palica

Co-founder and CEO, Zepto

But Palicha and Vohra were no strangers to the instant food delivery business. In 2020, at just 17, they started KiranaKart, which they said delivered their groceries to Mumbai in under 45 minutes.

“Some people were getting deliveries [within] a time frame of 10-15 minutes, ”Vohra said.

“In terms of retention, how much they liked the platform and how often they referred to their friends, [it] it was significantly higher for those people who received deliveries in that time frame. ”

“That’s why we said, ‘Look, maybe there’s value in exploring it.'”

Zepto isn’t the only fast-trading startup in India, and competition is heating up both nationally and globally. According to Redseer, the country’s online food market will be worth around $ 24 billion by 2025.

Zepto

They weren’t wrong. According to research by consultancy Redseer, India’s online food market could be worth up to $ 25 billion by 2025 and this is an opportunity “too exciting to pass up,” Palicha said.

“If you look at all the other major categories of e-commerce – electronics, apparel, you take them all and you combine them, they are a fraction of the food market,” he added.

Building trust and reliability

To fulfill their grocery orders in less than 10 minutes, the two created a network of obscure shops or micro-distribution centers. through the cities.

Dark shops are closed to the public, housing goods are intended for online ordering only.

“We design our network throughout the city to make sure our collection points are very close to population groups in a specific neighborhood,” Palicha said.

To fulfill their grocery orders in less than 10 minutes, the two created a network of dark shops, like the one above, throughout the cities.

Zepto

“What ends up happening is that our average delivery distances are so short that we are able to deliver consistently in 10 minutes.”

The startup added that the average distance for its deliveries ranges from 1.7 to 2 kilometers. Other forms of hyperlocal delivery, he said, could be “2 to 2.5 times longer than that.”

Today, Zepto says, it operates hundreds of dark shops in 10 cities across India, with tens of thousands of drivers at work. Palicha added that he is currently delivering “90 to 95%” of his orders in five to 20 minutes.

But speed isn’t Zepto’s only secret to building customer loyalty and building loyalty. The startup, named after zeptosecond, the smallest unit of time, claimed to add 100,000 new users per day.

“To truly build long-term customer loyalty, what you really need to build is trust and reliability. Reliability comes in many ways,” said Vohra, who is also Chief Technology Officer.

“Yes, we deliver on time, but also reliability in terms of: if I order 10 things, I get those 10 exact things. And if I order fruit and vegetables, [they’re] the highest possible quality “.

Keep your money consumption low

Investors are also thrilled with Zepto’s popularity.

To date, the company had attracted $ 360 million from investors, including Y Combinator, the US health care consortium Kaiser Permanente and Nexus Venture Partners. Its latest round of funding puts the company on track for a probable $ 1 billion valuation.

Palicha said that one of the key factors in Zepto’s investment success is its “operational discipline”.

“When we turned to investors this time around, we showed very, very clear paths to profitability. We’ve gone from $ 0 in revenue about a year ago to now, we’re making hundreds of millions of dollars in annualized revenue,” he added.

“We’re still talking in terms of multiples and not percentages when it comes to our growth rate, and that’s something we’re excited about.”

From day one, we forced ourselves to be efficient to make every dollar last.

Aadit Palica

Co-founder and CEO, Zepto

Zepto says it has managed to reduce its cash consumption rate by 5 times per order, while achieving 800% quarter-over-quarter revenue growth.

Even so, the days of easy money for tech companies that burn cash are over as interest rates rise and investors demand more results. However, the young founders remain unmoved.

“We are in a position where you look at the size of our balance sheet, we actually have the capital to last multiple years, in the context of this recession,” Palicha said.

“From day one, we have been committed to being efficient to make every dollar last. We are able to place more orders with the same amount of money, we are able to acquire more customers with the same amount of money.”

Zepto’s founders may be young, but their belief in their product is unwavering. “Whether it was in front of an investor, a senior executive, any government and regulatory stakeholder, you realize that what you are building is on the right side of what customers want,” said Aadit Palicha (right).

Zepto

Keeping costs lower than its competitors in the high-growth tech category gave them an edge, the duo said.

“This only puts us in a position where we are able to continue to grow sustainably, where other people have been forced to … induce layoffs, essentially withdraw growth plans and bargain to survive in a market like this.” Palicha added.

Touch ‘the one billion mark’?

Due to that tough environment, Palicha and Vohra are not resting on their laurels despite the new funding Zepto has in the bag.

“The main goal now is simply to build the incremental scale we need to break even in key markets. Once we have a budget that is now operating in balance, we can start expanding into new cities with much more confidence and clarity.” Palica said.

It was previously reported that Zepto is earning $ 200 million to $ 400 million in annualized revenue and the founders are now hoping to “hit the billion.”

Palica added: “[Zepto] it came out as a personal project between Kaivalya and [me] to see if we can solve a small-scale problem in our neighborhood. ”

“It eventually evolved into the company we are today, for which we are incredibly grateful.”

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